Air-freight shippers scramble for space
With cargo capacity in short supply, big shippers are grabbing up charter space.
By Toby Gooley
"Capacity" was the word of the day at the Coalition of New England Companies for Trade (CONECT) 8th Annual Northeast Cargo Symposium, held in early November. Whether the discussion involved ocean, air, or intermodal transportation, capacity—or to be precise, the lack thereof—was a frequent topic of conversation.
For attendees who ship air freight, it might have been the only one. A year of market turmoil has left them facing a severe shortage of space. The worldwide collapse of air-cargo traffic, which began in 2008, led many carriers to slash rates in a bid to fill aircraft. Some even rebated the base freight charge and kept only the fuel and other surcharges—a tactic that Jack Lampinski, managing director-Americas for Swiss World Cargo, called "totally nuts." Swiss, which does not operate any freighters, did not cut rates and saw load factors decline, he said.
When rates reached unsustainably low levels, some carriers cut back flights and took aircraft out of service. Lufthansa Cargo, for instance, currently has five freighters parked in the desert and one on standby, Lampinski said.
Carriers on the trans-Pacific and Asia-to-Europe routes appear to have been overzealous with their cutbacks. One attendee, a regional manager for a U.S.-based freight forwarder, said his company's Hong Kong office had reported that a 4,000-ton backlog of outbound freight had developed at Hong Kong Air Cargo Terminals, and that electronics shippers like LG were paying spot-market prices of $6 per kilo (2.2 pounds) from Hong Kong to London, up from $3 just four weeks earlier.
To guarantee capacity and keep a lid on pricing, big shippers are scrambling to grab charter space. According to Daniel Wolf, director of logistics and purchasing for Boston Apparel Group, Apple and Sony have chartered space on some 60 flights from Asia over the next two weeks.
Why are shippers that normally ship under long-term contracts suffering the caprices of the spot market? When rates were in free fall, many forwarders and their shipper customers were reluctant to lock in pricing under block space agreements with carriers, said a vice president of a large European freight forwarder, who asked not to be named. That was a smart move—for a while, he told DC VELOCITY. "They didn't want to commit to rates and then see them go even lower. They made a big miscalculation."
About the Author
Before joining DC VELOCITY and its sister publication, CSCMP's Supply Chain Quarterly, where she serves as Editor, Toby Gooley spent 20 years at Logistics Management covering international trade and transportation as Senior Editor and Managing Editor. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
More articles by Toby Gooley
- FedEx chief rails against states' efforts to restrict use of independent contractors
- TRB panel criticizes DOT, FHWA for punting on truck size, weight study
- XPO gets offers for Con-way Truckload as $3 billion transaction of parent nears closing
- Driver shortage to hit highest levels on record this year with 47,500 unfilled seats, report says
- Fresh talk on produce supply chain issues
Join the Discussion
After you comment, click Post. If you're not already logged in, you will be asked to log in or register.
Feedback: What did you think of this article? We'd like to hear from you. DC VELOCITY is committed to accuracy and clarity in the delivery of important and useful logistics and supply chain news and information. If you find anything in DC VELOCITY you feel is inaccurate or warrants further explanation, please ?Subject=Feedback - : Air-freight shippers scramble for space">contact Chief Editor David Maloney. All comments are eligible for publication in the letters section of DC VELOCITY magazine. Please include you name and the name of the company or organization your work for.